Sam's Utility Function Is U(x, Y)=2x + Y, Where X

question 38

Multiple Choice

Sam's utility function is U(x, y) =2x + y, where x is the number of x's he consumes per week and y is the number of y's he consumes per week.Sam has $200 a week to spend.The price of x is $4.Sam currently doesn't consume any y.Sam has received an invitation to join a club devoted to the consumption of y.If he joins the club, Sam can get a discount on the purchase of y.If he belonged to the club, he could buy y for $1 a unit.How much is the most Sam would be willing to pay to join this club?

• A)Nothing
• B)$100 a week
• C)$50 a week
• D)$40 a week
• E)None of the above.

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Definitions:

Capacity

The maximum amount that something can contain or produce; in a business context, it often refers to the maximum output or production ability.

Collateral

An asset that a borrower offers to a lender as security for a loan.

Capital

Refers to financial assets, including funds held in deposit accounts and investments, but can broadly include anything that can enhance a person’s or entity’s ability to generate value.

Character

In finance, part of credit analysis that evaluates a borrower's reputation or track record in repaying debts.